European cash equity markets are mixed ahead of the midway stage (FTSE -0.6%, DAX -0.2%, CAC 0.0%, FTSE MIB +0.5%). Basic resource stocks jumped at the open after Chinese officials signalled additional stimulus measures overnight but gains have since faded while the bank and insurance sectors took over as the best performers. From a regional perspective, the UK’s FTSE 100 has fallen behind this morning after UK PM May saw her Brexit deal overwhelmingly defeated in the House of Commons and now faces a confidence motion later today – the vote is expected around 19:00 GMT and she is widely expected to win. Sterling has been relatively stable meanwhile having rebounded yesterday on the parliament vote with many believing this could lead to a softer Brexit rather than a no-deal scenario. Chancellor Hammond has also reportedly told business leaders that parliament could vote next week to delay Article 50. UK macro data was largely ignored with headline CPI inline at +2.1% YoY while the core rate was a touch stronger tat +1.9% (f/c. +1.8%). Elsewhere in FX, the Dollar Index has edged up +0.1% and is just about holding onto the 96.0 handle while the Antipodean currencies have slumped to the bottom of the G10 pile. At the ECB, Executive Board member Mersch said the slowdown in the Euro Zone economy is what they were expecting and now it has come, they don’t have to consider it again in their response. Villeroy added that rate increases will be extremely gradual and depend on the economic situation in the Euro Zone. Looking ahead, futures are pointing to a relatively flat open on Wall Street with earnings due from Bank of America and Goldman Sachs before the bell. On the data front, US retail sales and import prices are both due at 13:30 GMT although may fall foul to the government shutdown.
Key Headlines/Data:
* European Corporate News:
– Norsk Hydro (+5.9%): Brazilian authorities have lifted an embargo at its aluminium refinery.
– Reckitt Benckiser (-2.5%): CEO Kapoor to retire by year end
– BNP Paribas (+1.0%): Reportedly lost $80 Mln in derivative trades
– Pearson (-6.8%): Cost cuts were required to meet full-year targets
* UK PM May’s Brexit deal was overwhelmingly defeated in parliament by 230 votes:
– Opposition leader Corbyn has called a no-confidence motion in the PM to take place later today (vote at 19:00 GMT) – she is expected to survive however as the DUP have pledged support
– Chancellor Hammond is said to have told business leaders that parliament could vote next week to delay Article 50
– House of Commons leader Leadsom said they have been clear they will not delay Article 50
– DUP Deputy leader Dodds said an extension of Article 50 is not inevitable and not necessary in his view
– German Economy Minister Altmaier said the EU should allow additional time for Brexit if necessary
– EU Brexit Minister Barnier said it is too soon to assess the impact of the UK parliament vote, adding that the backstop must remain and be credible in the Brexit deal
* German CPI Data (Dec F):
– CPI M/M +0.1% versus +0.1% expected, previous +0.1%
– CPI Y/Y +1.7% versus +1.7% expected, previous +1.7%
– CPI EU Harmonized M/M +0.3% versus +0.3% expected, previous %
– CPI EU Harmonized Y/Y +1.7% versus +1.7% expected, previous +1.7%
* EU New Car Registrations Y/Y (Dec) -8.4%, previous -8.0%
* ECB’s Mersch said the slowdown in the Euro Zone economy is what they were expecting and now it has come, we don’t have to consider it again in our response.
* Swedish Social Democrat Leader Lofven said he is ready to be nominated as the next PM:
– Left leader Sjostedt said he is ready to support Lofven as PM
* ECB’s Nowotny said Euro Zone inflation is stable but low
* Italian Industrial Orders/Sales Data (Nov):
– Industrial Orders M/M -0.2%, previous -0.3% revised to -0.5%
– Industrial Orders Y/Y -2.0%, previous +2.0% revised to +1.8%
– Industrial Sales M/M +0.1%, previous -0.5%
– Industrial Sales Y/Y +0.6%, previous +2.0%
* ECB’s Villeroy said the ‘Yellow Vest’ protests will have a big short-term impact on the economy but measures after protests will boost growth. From a broader view, he said the economic outlook is surrounded by uncertainty and growth is slowing but they are not in a downturn cycle. He later added that rate increases will be extremely gradual and depend on the economic situation in the Euro Zone.
* Bank of England Governor Carney assured that UK banks are well capitalised for extreme event, adding that he is confident that the core of the UK financial system is resilient to shocks
* UK Inflation Data (Dec):
– CPI M/M +0.2% versus +0.2% expected, previous +0.2%
– CPI Y/Y +2.1% versus +2.1% expected, previous +2.3%
– Core CPI Y/Y +1.9% versus +1.8% expected, previous +1.8%
– RPI M/M +0.4% versus +0.5% expected, previous +0.1%
– RPI Y/Y +2.7% versus +2.9% expected, previous +3.2%
– PPI Output M/M -0.3% versus +0.1% expected, previous +0.2% revised to +0.1%
– PPI Output Y/Y +2.5% versus +2.9% expected, previous +3.1% revised to +3.0%
* UK House Price Index Y/Y (Nov) +2.8% versus +3.0% expected, previous +2.7%
* Riksbank Deputy Governor Skinglsey said Swedish inflation is roughly inline with forecasts, adding that CPIF will dip slightly below forecasts but sight deviations are not a problem.
* Italian CPI Data (Dec F):
– CPI M/M -0.1% versus -0.1% expected, previous -0.1%
– CPI Y/Y +1.1% versus +1.1% expected, previous +1.1%
– CPI EU Harmonized M/M -0.1% versus -0.1% expected, previous -0.1%
– CPI EU Harmonized Y/Y +1.2% versus +1.2% expected, previous +1.2%
